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Everything You Need To Know About Commercial Mortgages For Hotels

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The UK hotel industry is going strong and commercial mortgage lenders are keen to back borrowers for purchases and refinances. If you’re thinking about taking the plunge, read our guide to find out all you need to know about specialist commercial mortgages for hotels. 

Experience isn’t needed

While experience in the hotel industry is preferred by lenders, it isn’t absolutely necessary because, as we’ve already mentioned, creditors are keen to finance hotels. Experience running a business, acting as a manager or even providing exceptional customer service will give your application authority. 

Carefully consider your chosen hotel

When choosing your perfect hotel, beware that lenders consider the hotels’ performance history, a particularly important point if you lack previous hotelier experience. The lender will ideally want to see 2 years of financial records and check the EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) to check the business’ ability to support the loan repayments. 

If they find the hotel has been successful and you can demonstrate real demand, your application is more likely to be approved. If you are trying to turn a failing hotel around, or even start one from scratch, you’ll put the lender at ease if you have experience running a business or providing great service. 

Include any changes in management & refurbishment 

If you’re planning on changing management in a failing hotel, make sure to include details of this in your application. A change in management can make a huge difference in a hotel’s reputation and lenders understand this can change the fortunes of a hotel overnight. This is also true of any refurbishments you plan on carrying out. Transforming dated decor or the theme and facilities of a hotel can have a huge impact on demand and how much you can charge per room.

Think about your marketing strategy 

Established hotels sometimes solely rely on repeat business and word of mouth to fill their rooms and while this can be a very effective method, such establishments run the risk of being left behind in our online world. So if you’re planning on making marketing changes, carefully plan on how you’re going to go about this. Whether you want to make changes to the booking system, explore new avenues of exposure or even host special events, you need to make sure you get the most value out of your business as possible because your lender will want to know all about your marketing plans. 

The ‘going concern value’

Most commercial mortgages for hotels are based on the ‘going concern value’ which means the lender can consider the value of both the property and the business. At FC Funding, a leading commercial mortgage broker, we can source offers of up to 80%, one of the highest found in the industry. Depending on the lender, you can choose capital repayments or interest only repayments on either a fixed or variable rate. 

Commercial mortgage checklist

Once you have applied for a commercial mortgage for a hotel, it usually takes between 6 – 8 weeks to complete, however, delays are often caused because the applicant hasn’t included everything the lender needs. Typically, you’ll be ask for some or all of the following information;

  • 6 months’ personal bank statement 
  • 2 years’ accounts of the hotel 
  • 6 months business bank statements (for refinance applications)
  • CV of the applicants
  • Business plan & projections (where applicable)

FC Funding is one of the South’s leading commercial mortgage brokers for the hotel industry. Our experienced team scour the market on your behalf to find bespoke mortgage deals tailored to your exact needs. To learn more and discuss your requirements, contact the FC Funding team today on 01202 937880.  

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